Employers Making Retirement Readiness a Top Priority

Among the more than 425 U.S. employers, who represent with 11 million employees surveyed, 80% cited financial wellness as a top priority in 2013, and 61% are looking beyond current participation and savings rates and are helping workers evaluate their retirement readiness, up from 50% in 2012.

Eighty-six percent of companies reported a plan to focus communications initiatives on helping their employees evaluate and understand how much they need to save for retirement. According to Aon Hewitt, workers need 11 times their final pay to meet their financial needs in retirement, but the average U.S. worker has a savings shortfall of 2.2 times pay.

“Employers understand that financial wellness is more than what workers are doing today in terms of savings in their retirement programs—that it’s evaluating whether their long-term investment strategies are positioning them to be ready when it comes time to retire and whether other priorities are getting in the way,” said Patti Balthazor Björk, director of Retirement Research at Aon Hewitt. “Helping workers get an accurate picture of their future needs and whether they are on track to meet those needs, and helping them create a roadmap for achieving those goals is paramount.”

Many companies advocate the use of investment advisory tools to support employees’ retirement goals. More than three-quarters (76%) currently offer target-date funds (TDFs), and of those that do not, 35% will likely add one in 2013. Sixty-four percent now offer managed accounts and online third-party investment advisory services, up from 40% in 2012.

Employers are also making changes to their defined contribution (DC) plans to help workers better manage their money in retirement. In-plan retirement income solutions—including professionally managed accounts with a drawdown feature, managed payout funds, or insurance or annuity products that are part of the fund lineup—are now offered by 28% of companies. This is nearly double the number (16%) that offered these solutions in 2012, and of those that do not currently offer some kind of annuity, 30% said they are likely to offer them in 2013.

“Retirement income solutions offer employees a way to receive regular, scheduled payments from their DC plan, much like what they would have seen from a traditional DB [defined benefit] plan,” said Björk. “These solutions have become increasingly attractive to workers because they enable them to manage their retirement income in a predictable way once they reach retirement.”

Other key findings of the survey include:

52% of companies will use podcasts and 42% will use text messages to communicate and educate their workers about their retirement benefits in 2013;

The percentage of plan sponsors that plan to use social media channels to communicate with workers has tripled, from 6% in 2012 to 18% in 2013;

37% of employers have recently reviewed the total defined contribution plan costs (fund, recordkeeping, and trustee fees). Among those who have not, 95% are likely to do so in 2013;

35% of employers completed a review of DC fund operations, including fund expenses and revenue sharing, and 87% plan to do so this year; and

31% of employers recently changed their DC plan fund lineup to reduce costs. More than half (52%) of the remaining companies said they may do so in 2013.